Munters Interim Report January-June 2021 - "Solid underlying demand, supply chain challenging"

April-June 2021:

• Solid demand in the quarter. Constraints in the supply chain related to the Covid-19 pandemic accelerated throughout the period leading to extended lead times and sourcing related production disturbances.
• Order intake increased +13%, currency adjusted strong growth of +23%, net sales increased +3%, currency adjusted +13%. Growth mainly driven by the battery sub-segments (part of the industrial segment) in business area AirTech and the swine segment in the US in business area FoodTech. Also, Services had good growth.
• The adjusted EBITA-margin at 14.2% (14.7), negatively impacted by constraints in the supply chain and business mix change.
• Leverage (net debt/adjusted EBITDA, LTM*) was at 1.9x, the same level at per end of March 2021.
• Net debt as of June 30 amounted to MSEK 2,209 compared to MSEK 2,208 at the end of March 2021. In the second quarter a 5-year
  re-financing was secured enabling execution of the long-term strategy.
• The strategy implementation with measures aiming at sharpening the customer offering and footprint optimization is progressing. A total of MSEK 89 was recorded as Items Affecting Comparability (IACs) in the quarter in business areas AirTech (MSEK 15) and FoodTech (MSEK 74). The main part of the cost was recorded as provisions related mainly to product rationalization in Europe as well as a phase out of a 1st generation IoT offering (severance, warranty claims, inventory, etc.).
  In addition, costs were recorded as incurred related to consultancy services for the execution of the strategy implementation.

January-June 2021:

• Strong, solid demand in the period. In some area the Covid-19 pandemic led to increasing demand, whereas increasing shortages in the supply chain resulted in extended lead times and sourcing related production disturbances.
• Order intake increased +11%, currency adjusted strong growth of +22%, and net sales increased +3%, currency adjusted +13%. Growth was mainly driven by the battery and pharma sub-segments (part of the industrial segment) in business area AirTech and the swine segment in China and the US in business area FoodTech. Services had good growth.
• The adjusted EBITA-margin at 13.3% (11.7). The improvement was mainly driven by increased net sales and high utilization rates, partly offset by supply chain constraints.
• Leverage (net debt/adjusted EBITDA, LTM*) was at 1.9x, the same level at per end of December 2020 and lower than same period last year (2.7x).
• Net debt as of June 30 amounted to MSEK 2,209 compared to MSEK 2,116 at the end of December 2020.

CEO comments:

Continued good underlying demand driven by industrial segment
In the second quarter demand continued to be solid, mainly driven by the battery sub-segment in the industrial segment of business area AirTech. Increased constraints in the supply chain due to Covid-19 throughout the quarter leading to longer lead times and sourcing related production disturbances. Costs continued to increase for raw material and freights. We have implemented consecutive price increases in 2021. These will come into effect over the coming quarters with the majority effect next year due to extended lead times.

Margin impacted by constraints in supply chain
We achieved solid order intake and net sales in the second quarter, both reported and currency adjusted. Region APAC showed strong growth driven by the battery sub-segment in AirTech, offset by a weaker swine market in China for FoodTech. Americas had good growth mainly because of the battery sub-segment in AirTech as well as the broiler, swine, layer and dairy segments in FoodTech. Region EMEA grew driven mainly by the battery sub-segment and the components segment in AirTech as well as growth in the greenhouse segment in FoodTech.

The adjusted EBITA-margin was weaker in the quarter due to supply chain disturbances, increased raw material and freight costs. In addition, a changed business mix had a negative impact on the margin.

Continued implementation of strategy and FoodTech strategy launch
The execution of our long-term strategy continued in the quarter with business area AirTech making an acquisition of a patent with the purpose of strengthening their technology position in the US core business. A frame agreement with a large data center hyperscale player was secured that will result in increased recurring revenues to this segment. Services also is expanding the footprint by setting up operations in Norway and Ireland. Business area FoodTech launched an updated strategy aiming at accelerating the digital journey and strengthen the equipment position. Already in the second quarter actions to strengthen the organization was taken resulting in new leadership for the area of Connected farms. In addition, Munters secured a 5-year re-financing of the main existing term loan and revolving credit facility, strengthening our ability to execute on the long-term strategy.

Supply chain constraints predicted to remain
Market demand continued to be solid and at the same time, operations were impacted by the Covid-19 pandemic through constraints in the supply chain. Currently, constraints are predicted to remain in the second half of 2021.

I would like to extend my sincere appreciation to our employees for their dedication to our customers and Munters.
 

Klas Forsström, President and CEO

Information about the webcast:

You are welcome to join a webcast or telephone conference on July 16, at 9:00, when the President and CEO, Klas Forsström, together with the Group Vice President and CFO, Annette Kumlien will present the report.

Webcast:
https://tv.streamfabriken.com/munters-q2-2021

Dial-in number for the telephone conference:

SE: +46 8 505 58375

UK: +44 3333009271

US: +16467224956

This interim report, presentation material and a link to the webcast will be available on https://www.munters.com/en/investor-relations/

Contact information:

Ann-Sofi Jönsson, Vice President, Investor Relations and Enterprise Risk Management
Phone: + 46 (0)730 251 005
Email: ann-sofi.jonsson@munters.com

This information is information that Munters Group AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 07.30 CET on July 16, 2021.
 

About Munters Group

Munters is a global leader in energy efficient air treatment and climate solutions. Using innovative technologies, Munters creates the perfect climate for customers in a wide range of industries. Munters has been defining the future of air treatment since 1955. Today, around 3,500 employees carry out manufacturing and sales in more than 30 countries. Munters Group AB reported annual net sales of more than SEK 7 billion in 2020 and is listed on Nasdaq Stockholm. For more information, please visit www.munters.com.
 

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